Market Brief March 16 2020

Not sure where to start today? Every post seems to be outdated the minute it is published! Whether a virus update, Fed decision, a political speech, geo-political affairs, or another stock industry takes a dive downward. Volatility remains high, driving the big daily swings in the stock market.

Last week, President Trump initiated a travel ban and events across the country ceased immediately. Last night, the Fed stepped in with another rate cut. The reaction from the market was one of fear, driving indexes lower, and initiating the third trading halt in the last month to start the week. Despite the historic big rally on Friday, all indexes finished the week down. The Dow dropped 10.46%, the S&P 500 fell 8.86%, and the Nasdaq dropped 8.18%.

The Week Ahead

The week ahead includes Retail Sales, Industrial Production, and Housing Start data. There reports will provide a gauge of the consumer and business sentiment during this time of uncertainty. The mortgage rate drops may act as a tailwind for home buyers and those refinancing, in the near term, but the prevailing headwind of the coronavirus economic disruption remains front and center. Coronavirus focus will be on the growth of new cases, as well as, policies designed to identify and subdue the outbreak.

Big Picture

Year-to-date index performance; Dow down 18.7%, S&P down 16.0%, and Nasdaq down 12.2%. The media is publishing a lot of information regarding corrections, bear markets, and recessions. Let’s break those down. A correction is typically considered when the stock indexes drop 10% from the recent highs. A bear market typically is defined by a drop of 20% from recent highs. And a recession is 2 or more consecutive quarters of declining GDP growth. Our current economic state may be a recession, however, we will not know until the quarterly numbers are published after Q2 2020 is over. Yes, the markets corrected more than 20% from the highs on February 19, therefore, indexes are in bear market territory. Turnaround signs remain high correlated to virus improvement. The slowing of new cases, the decline of deaths, and the increasing number of recoveries. Until then, volatility remains here to stay. Corporate guidance up to this point is hard to judge. The next round of corporate earnings will be very important regarding the impact of the virus disruption and growth prospects going forward. Market volatility is inevitable when investing in the stock market.

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